GST effect: LPG costlier on GST, lower subsidy

Your household expenses on LPG cylinder may have shot up by up to Rs 32 from 1 July depending on the state you reside in, according to a report. There are twin reasons for this: one is the introduction of GST and the the other is a reduction in subsidy, the report said.

Domestic LPG is under the 5% tax bracket under the GST regime. Compared with this, earlier the cooking gas was not taxed in some of the states and others applied 2-4 percent VAT, according to the report. So in states where it was not taxed, LPG cylinder charges will go up by Rs 12-15 and in other states, the increase will depend on the difference with the earlier tax rate.

Along with this, there is a reduction in the subsidy paid on LPG, which effectively pushes up the cost for the consumer further. According to Vipul Purohit, national secretary of All India LPG Distributors Federation, quoted in the TOI report, consumers in Agra, for instance, will get Rs 107 in their account as against Rs 119.85 earlier for a domestic LPG cylinder.

Overall, the increase in LPG costs for households can go up to Rs 32, the report says. This is against the finance ministry’s earlier claim that LPG prices will decline after introduction of GST. The ministry’s claim is true only for the commercial consumers like that of auto LPG. This is because all grades of LPG come under the same tax bracket under the GST regime. Earlier the tax incidence on auto LPG was higher at 12-15 percent. The GST regime has brought it down to 5 percent, thus giving a push to green fuel.

An earlier report in the Business Standard had pointed out that the move will bring bot commercial and domestic LPG will reduce diversion of cooking fuel for commercial use. However, the household customers are likely to feel the pinch after the GST rollout unless the international prices declines further, which is directly linked to subsidy.